When preparing the operating activities section of the statement of cash flows using the indirect method,an increase in income taxes payable is added to net income.To convert net income to cash flows from operating activities,an increase in income taxes payable means that income tax expense on the income statement is greater than the amount of cash paid for income taxes;therefore,the increase should be added to net income.

Question

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This is because an increase in income taxes payable indicates that more income tax expenses were recognized on the income statement than were actually paid in cash, meaning that the increase should be added to net income when converting it to cash flows from operating activities using the indirect method.

When Preparing the Operating Activities Section of the Statement of Cash